'Wealth and Democracy': Decline and Fall of the American Empire

By JOHN B. JUDIS

Published: May 12, 2002

When future historians want to understand the politics of the last half of the 20th century, they will treasure Kevin Phillips's books, particularly ''The Emerging Republican Majority'' and ''Post-Conservative America.'' Phillips's latest book, ''Wealth and Democracy,'' has its moments, principally as a jeremiad against the financial excesses of the late 1990's, but it lacks the force and clarity of his earlier works. It is annoyingly repetitious and contains what seems like needless detail about things like how many millionaires lived in Philadelphia in 1845. And to the extent that it has a central premise, the premise is not one that commands assent.

As he has done before, Phillips argues that America is the latest victim of the cyclical rise and fall of great imperial powers -- from Greece and Rome through Britain and the United States. He portrays the United States ''against the warning backdrop and decline symptoms of its three predecessors -- Britain, Holland, and Hapsburg Spain.'' This view of history, which was popular among the nation's founders, was revived in the late 1980's by Phillips and the historian Paul Kennedy. (I also did my bit in ''Grand Illusion: Critics and Champions of the American Century.'') The idea fell into disfavor during the boom of the 1990's, but Phillips insists that what many Americans took for symptoms of a new economy were further signs that the United States is about to suffer the same dismal fate as its imperial predecessors.

Phillips focuses on the similarities between the United States now and the 17th-century Netherlands and early-20th-century Britain. Among other things, he cites ''financialization,'' a preoccupation with success in ''finance, technology and services'' and the neglect of ''basic manufacturing,'' speculation and the recurrence of bubbles and manias (from Dutch tulips to America's dot-coms), the export of capital and jobs, the reliance on foreigners to fill domestic jobs, growing inequality of wealth and income and the ''exposure . . . to war.'' The trouble is that similar symptoms don't necessarily reflect similarity in causes and conditions: the fact that the British had to enlist ''foreigners to aid or run chemical and electrical industries'' may have been a sign of their imminent decline, but the influx of skilled Asian workers, many of whom have become American citizens, into Silicon Valley during the 1990's has contributed to the United States' economic vitality.

If you look at the actual causes of decline in the Netherlands and Britain, they do not seem present in the United States today. The Netherlands was felled by European tariffs against its textiles, British discrimination against its ships and its vulnerability to military attack from its neighbors. Britain declined in the early 20th century because it lagged behind the United States and Germany in making the transition from owner-operated manufacturing companies to large-scale corporate capitalism. In the late 1980's, it did seem that the United States would suffer a similar fate at the hands of Japan and West Germany, but just as they began to catch up in basic manufacturing, the locus of growth and innovation changed from industrial to postindustrial capitalism -- from hardware to software (much of which is misleadingly labeled services). The United States was better suited for this new phase of capitalism, and has once again pulled ahead of its rivals.

Phillips could have benefited from a quick glance at the statistics. He writes that ''the United States of 2000 was roughly as distant from its post-1945 peak share of world production as the Britain of 1910-14 had been from her own.'' The facts are these. In 1950, when Europe and Japan had still not recovered from World War II, the United States accounted for 27 percent of the world's output; 50 years later, with Europe and Japan fully recovered, the United States accounted for 23 percent of the world's output, with America's gross domestic product almost double that of Germany and Japan combined. By comparison, Britain in 1914 accounted for only 8.3 percent of the world's G.D.P., with its total already less than half that of the United States. The United States is obviously not without problems -- most notably, the growing economic inequality that Phillips cites -- but its flaws cannot plausibly be attributed to a dynamic of imperial decline.

In the book's last chapters, Phillips introduces a different cycle of history. With a nod to Will and Ariel Durant and Arthur Schlesinger, he suggests that the United States has alternated between periods of ''wealth laudation'' and ''democracy.'' For the last two decades it has been in the throes of the former and could move still farther toward establishing ''plutocracy by some other name.'' But it could also undergo a Schlesingerian reaction against plutocracy.

The reaction, Phillips says, could take one of two forms, ''progressive'' or ''radical.'' The progressive reaction would consist of a mobilization like that of Theodore Roosevelt ''against corruption, polarization and market Darwinism,'' reviving America and prolonging its ascendancy atop the pyramid of nations. The radical reaction would reflect American decline, recalling the politics of the Dutch Patriot Revolt of the late 18th century or the situation of the British Labor Party after World War II. Dreams of international pre-eminence would be abandoned; ''economic nationalism'' would be stressed. Among other things, America would impose ''import duties to recapture the U.S. internal market for domestic producers and workers.''